Momentum Play: Genesis Energy (GEL)

Genesis Energy LP (GEL) continues to pressure its multi-year high after reporting better than expected Q2 results in early August that included a 38% earnings surprise. With the next-year estimates projecting 25% growth, the longer term picture looks good too.

Company Description

Genesis ENergy LP, with its subsidiaries, operates in the mid stream segment of the energy market, providing refining and transportation services to the crude and natural gas industries in the United States. The company was founded in 1996 and has a market cap of $866 million.

Our most recent look at GEL came on August 5 when the company reported better than expected Q2 results after all four of its segments posted gains from last year.

Second-Quarter Results

Revenue for the period was up 33% from last year to $457 million as all four of the companies primary operating segments experienced gains from last year. Earnings also came in strong at 29 cents, 38% ahead of the Zacks Consensus Estimate.

Genesis also announced that it will distribute 37.5 cents per unit holder for a total of $14.5 million, making this the 20 consecutive quarter that the company has increased its distribution.

Crude oil pipeline barrels per day increased 12% from last year to 65,795.

Genesis’ refining business also fared well, with its Segment Margin (revenues less cost of sales, operating expenses and segment general and administrative expenses, plus our share of the distributable cash generated by our equity investees) up 23% from last year to $16.2 million.

Balance Sheet

As is common with capital intensive companies, GEL has a total debt load of $454 million with $11 million in cash and equivalents. Its debt-to-equity level however looks relatively strong, coming in at 67% against the industry average of 119%.

Estimates

We saw some solid movement in estimates off the good quarter, with the current year adding 20 cents to 97 cents and the next year up 24 cents to $1.22, a bullish 25% growth projection.

Valuation

In spite of the recent gains, the valuation picture is in check at 22X forward earnings, a slight premium to its peers 20X.

2-Year Chart

GEL continues to pressure the multi-year high just above $21 after rebounding from a long-term trend line in early June. The MACD below the chart is looking bullish too, with the short-term moving average jumping ahead of its long-term counterpart, take a look below.